UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------
FORM 10-QSB
X QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
- ----- OF 1934
For the quarterly period ended March 31, 2000
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
- ----- EXCHANGE ACT OF 1934
For the transition period from ______________ to ______________.
Commission file number 0-18278
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PHOENIX LEASING CASH DISTRIBUTION FUND IV,
A CALIFORNIA LIMITED PARTNERSHIP
- --------------------------------------------------------------------------------
Registrant
California 68-0191380
- --------------------------------- ----------------------------------
State of Jurisdiction I.R.S. Employer Identification No.
2401 Kerner Boulevard, San Rafael, California 94901-5527
- --------------------------------------------------------------------------------
Address of Principal Executive Offices Zip Code
Registrant's telephone number, including area code: (415) 485-4500
--------------
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
preceding requirements for the past 90 days.
Yes X No
----- -----
6,192,840 Units of Limited Partnership Interest were outstanding as of March 31,
2000.
Transitional small business disclosure format:
Yes No X
----- -----
Page 1 of 13
<PAGE>
Part I. Financial Information
-----------------------------
Item 1. Financial Statements
PHOENIX LEASING CASH DISTRIBUTION FUND IV,
A CALIFORNIA LIMITED PARTNERSHIP
CONSOLIDATED BALANCE SHEETS
(Amounts in Thousands Except for Unit Amounts)
(Unaudited)
March 31, December 31,
2000 1999
---- ----
ASSETS
Cash and cash equivalents $ 8,764 $ 7,732
Accounts receivable (net of allowance for losses on
accounts receivable of $149 and $161 at March 31,
2000 and December 31, 1999, respectively) 82 95
Notes receivable (net of allowance for losses on
notes receivable of $33 and $409 at March 31,
2000 and December 31, 1999, respectively) 2,136 2,060
Equipment on operating leases and held for lease
(net of accumulated depreciation of $683 and
$2,371 at March 31, 2000 and December 31, 1999,
respectively) 13 8
Net investment in financing leases (net of allowance
for early terminations of $12 and $11 at March
31, 2000 and December 31, 1999, respectively) 741 1,090
Capitalized acquisition fees (net of accumulated
amortization of $10,837 and $10,811 at March 31,
2000 and December 31, 1999, respectively) 94 120
Marketable securities 391 42
Other assets -- 101
------- -------
Total Assets $12,221 $11,248
======= =======
LIABILITIES AND PARTNERS' CAPITAL
Liabilities
Accounts payable and accrued expenses $ 745 $ 846
------- -------
Total Liabilities 745 846
------- -------
Partners' Capital
General Partner -- --
Limited Partners, 6,500,000 units authorized,
6,492,727 units issued, 6,192,840 units
outstanding at March 31, 2000 and December 31,
1999 11,085 10,361
Accumulated other comprehensive income 391 41
------- -------
Total Partners' Capital 11,476 10,402
------- -------
Total Liabilities and Partners' Capital $12,221 $11,248
======= =======
The accompanying notes are an integral part of these statements.
2
<PAGE>
PHOENIX LEASING CASH DISTRIBUTION FUND IV,
A CALIFORNIA LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE INCOME
(Amounts in Thousands Except for Per Unit Amounts)
(Unaudited)
Three Months Ended
March 31,
2000 1999
---- ----
INCOME
Rental income $ 218 $ 128
Gain on sale of securities 155 --
Earned income, financing leases 63 132
Interest income, notes receivable 79 146
Equity in earnings from joint ventures, net 6 22
Other income 124 88
------- -------
Total Income 645 516
------- -------
EXPENSES
Depreciation 7 81
Amortization of acquisition fees 26 67
Lease related operating expenses 7 3
Management fees to General Partner 41 69
Reimbursed administrative costs to General Partner 67 58
Provision for (recovery of) losses on receivables (375) 20
Legal expense 119 75
General and administrative expenses 29 36
------- -------
Total Expenses (79) 409
------- -------
NET INCOME 724 107
Other comprehensive income:
Unrealized gains (losses) on securities:
Unrealized holding gains (losses) arising
during period 504 (100)
Less: reclassification adjustment for
gains included in net income (155) --
------- -------
Other comprehensive income (loss) 349 (100)
------- -------
COMPREHENSIVE INCOME $ 1,073 $ 7
------- -------
NET INCOME PER LIMITED PARTNERSHIP UNIT $ .12 $ --
======= =======
DISTRIBUTIONS PER LIMITED PARTNERSHIP UNIT $ -- $ .25
======= =======
ALLOCATION OF NET INCOME:
General Partner $ -- $ 82
Limited Partners 724 25
------- -------
724 $ 107
======= =======
The accompanying notes are an integral part of these statements.
3
<PAGE>
PHOENIX LEASING CASH DISTRIBUTION FUND IV,
A CALIFORNIA LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in Thousands)
(Unaudited)
Three Months Ended
March 31,
2000 1999
---- ----
Operating Activities:
- --------------------
Net income $ 724 $ 107
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 7 81
Amortization of acquisition fees 26 67
Equity in earnings from joint ventures, net (6) (22)
Gain on sale of securities (155) --
Gain on sale of equipment (37) (13)
Provision for early termination, financing leases 1 --
Provision for (recovery of) losses on notes
receivable (376) 20
Decrease (increase) in accounts receivable 13 (14)
Decrease in accounts payable and accrued
expenses (101) (58)
Decrease in other assets 39 12
------- -------
Net cash provided by operating activities 135 180
------- -------
Investing Activities:
- --------------------
Principal payments, financing leases 335 1,080
Principal payments, notes receivable 300 488
Proceeds from sale of equipment 38 10
Proceeds from sale of securities 155 --
Distributions from joint ventures 69 67
Payment of acquisition fees -- 3
------- -------
Net cash provided by investing activities 897 1,648
------- -------
Financing Activities:
- --------------------
Distributions to partners -- (1,632)
------- -------
Net cash used in financing activities -- (1,632)
------- -------
Increase in cash and cash equivalents 1,032 196
Cash and cash equivalents, beginning of period 7,732 6,877
------- -------
Cash and cash equivalents, end of period $ 8,764 $ 7,073
======= =======
The accompanying notes are an integral part of these statements.
4
<PAGE>
PHOENIX LEASING CASH DISTRIBUTION FUND IV,
A CALIFORNIA LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1. General.
-------
The accompanying unaudited condensed consolidated financial statements
have been prepared by the Partnership in accordance with generally accepted
accounting principles, pursuant to the rules and regulations of the Securities
and Exchange Commission. In the opinion of Management, all adjustments
(consisting of normal recurring accruals) considered necessary for a fair
presentation have been included. Although management believes that the
disclosures are adequate to make the information presented not misleading, it is
suggested that these condensed financial statements be read in conjunction with
the financial statements and the notes included in the Partnership's Financial
Statement, as filed with the SEC in the latest annual report on Form 10-K.
The Partnership Agreement stipulates the methods by which income will
be allocated to the General Partner and the limited partners. Such allocations
will be made using income or loss calculated under Generally Accepted Accounting
Principles for book purposes, which varies from income or loss calculated for
tax purposes.
The calculation of items of income and loss for book and tax purposes
may result in book basis capital accounts that vary from the tax basis capital
accounts. The requirement to restore any deficit capital balances by the General
Partner will be determined based on the tax basis capital accounts. At
liquidation of the Partnership, the General Partner's remaining book basis
capital accounts will be reduced to zero through the allocation of income or
loss.
Note 2. Reclassification.
----------------
Reclassification - Certain 1999 amounts have been reclassified to
conform to the 2000 presentation.
Note 3. Income Taxes.
------------
Federal and state income tax regulations provide that taxes on the
income or loss of the Partnership are reportable by the partners in their
individual income tax returns. Accordingly, no provision for such taxes has been
made in the accompanying financial statements.
Note 4. Notes Receivable.
----------------
Impaired Notes Receivable. At March 31, 2000, the Partnership has
investments in notes receivable, before allowance for losses, of $2,168,000 of
which $176,000 is considered to be impaired. The impaired loans of $176,000 are
net of specific write-downs of $299,000. The Partnership has an allowance for
losses of $33,000 as of March 31, 2000. The average recorded investment in
impaired loans during the three months ended March 31, 2000 and 1999 was
approximately $176,000 and $260,000, respectively.
5
<PAGE>
The activity in the allowance for losses on notes receivable during the
three months ended March 31, is as follows:
2000 1999
---- ----
(Amounts in Thousands)
Beginning balance $ 409 $2,375
Provision for (recovery of) losses (376) 21
Write downs - -
------ ------
Ending balance $ 33 $2,396
====== ======
Note 5. Net Income (Loss) and Distributions Per Limited Partnership Unit.
----------------------------------------------------------------
Net income and distributions per limited partnership unit were based on
the limited partners' share of net income and distributions, and the weighted
average number of units outstanding of 6,192,840 for the three months ended
March 31, 2000 and 1999. For purposes of allocating net income (loss) and
distributions to each individual limited partner, the Partnership allocates net
income (loss) and distributions based upon each respective limited partner's net
capital contributions.
Note 6. Investment in Joint Ventures.
----------------------------
Equipment Joint Venture
- -----------------------
The aggregate financial information of the equipment joint venture is
presented as follows:
March 31, December 31,
2000 1999
---- ----
(Amounts in Thousands)
Assets $ - $177
Liabilities - 35
Partners' Capital - 142
Three Months Ended
March 31,
2000 1999
---- ----
(Amounts in Thousands)
Revenue $ 16 $101
Expenses 3 9
Net Income 13 92
The remaining equipment joint venture was closed during the three
months ended March 31, 2000.
6
<PAGE>
Financing Joint Venture
- -----------------------
The aggregate financial information of the financing joint venture is
presented as follows:
Three Months Ended
March 31,
2000 1999
---- ----
(Amounts in Thousands)
Revenue $ - $ 1
Expenses - 51
Net Loss - (50)
The remaining financing joint venture was closed during the third
quarter of 1999.
Foreclosed Cable Systems Joint Ventures
- ---------------------------------------
The aggregate combined financial information of the foreclosed cable
systems joint ventures is presented as follows:
Three Months Ended
March 31,
2000 1999
---- ----
(Amounts in Thousands)
Revenue $ - $ 60
Expenses - 79
Net Loss - (19)
The remaining foreclosed cable system joint ventures were closed during
1999.
Note 7. Legal Proceedings.
-----------------
On October 28, 1997, a Class Action Complaint (the "Complaint") was
filed against Phoenix Leasing Inc., Phoenix Leasing Associates, II and III L.P.,
Phoenix Securities Inc. and Phoenix American Inc. (the "Companies") in
California Superior Court for the County of Sacramento by eleven individuals on
behalf of investors in Phoenix Leasing Cash Distribution Funds I through V (the
"Partnerships"). The Companies were served with the Complaint on December 9,
1997. The Complaint sought declaratory and other relief including accounting,
receivership, imposition of constructive trust and judicial dissolution and
winding up of the Partnerships, and damages based on fraud, breach of fiduciary
duty and breach of contract by the Companies as general partners of the
Partnerships.
Plaintiffs severed one cause of action from the Complaint, a claim
related to the marketing and sale of CDF V, and transferred it to Marin County
Superior Court (the "Berger Action"). Plaintiffs then dismissed the remaining
claims in Sacramento Superior Court and re-filed them in a separate lawsuit
making similar allegations (the "Ash Action").
7
<PAGE>
In the Ash action, Plaintiffs have filed a fourth amended complaint
which includes six causes of action: breach of fiduciary duty, constructive
fraud, judicial dissolution of Cash Distribution Fund IV, judicial dissolution
of Cash Distribution Fund V, accounting and alter ego. The court sustained
Defendant's demurrers to the first four claims and Defendants have recently
answered the complaint concerning the remaining claims.
The Berger complaint relates to alleged misrepresentations made in
connection with the offering of Cash Distribution Fund V. Defendants have
answered the complaint and discovery has commenced. A class has been certified.
The Plaintiff's deposition has been taken and no other depositions are
scheduled.
The Companies intend to vigorously defend both actions.
During the three months ended March 31, 2000 and 1999, the Partnership
recorded legal expenses of approximately $0 and $25,000, respectively, in
connection with the above litigation as indemnification to the General Partner.
The Partnership is not a party to any legal proceedings which would
have a material adverse impact on its financial position.
8
<PAGE>
PHOENIX LEASING CASH DISTRIBUTION FUND IV,
A CALIFORNIA LIMITED PARTNERSHIP
Item 2. Management's Discussion and Analysis of Financial Condition and Results
-----------------------------------------------------------------------
of Operations.
-------------
Results of Operations
Phoenix Leasing Cash Distribution Fund IV, a California limited
partnership (the "Partnership"), reported net income of $724,000 and $107,000
during the three months ended March 31, 2000 and 1999, respectively. The
increase in net income for the three months ended March 31, 2000, compared to
the same period in 1999, is a result of an increase in rental income, gain on
sale of securities and a recovery of provision for losses on notes receivable,
offset by decreases in earned income from financing leases and interest income
from notes receivable.
Total income increased $129,000 for the three months ended March 31,
2000, as compared to the same period in 1999. Rental income increased by
$90,000 for the three months ended March 31, 2000, compared to the same period
in 1999. The increase in rental income is due to miscellaneous charges related
to rental activity being recognized as income in the three months ended March
31, 2000; however, the Partnership's equipment portfolio has decreased. The
Partnership owned equipment with an aggregate original cost of $5.5 million at
March 31, 2000, as compared to $19.3 million at March 31, 1999.
The Partnership reported a gain on sale of securities of $155,000 for
the three months ended March 31, 2000, compared to $0 in 1999. The securities
sold in 2000 consisted of common stock received through the exercise of stock
warrants granted to the Partnership as part of financing agreements with
emerging growth companies that are publicly traded. The Partnership received
proceeds of $155,000 from the sale of these securities during the three months
ended March 31, 2000. In addition, at March 31, 2000, the Partnership owns
shares of stock and stock warrants in emerging growth companies that are
publicly traded with an unrealized gain of approximately $391,000. These stock
warrants contain certain restrictions, but are generally exercisable within one
year.
The above increases in income were offset by decreases in earned income
from financing leases and interest income from notes receivable. The decrease in
earned income from financing leases of $69,000 for the three months ended March
31, 2000, compared to the same period in the prior year, is due to a decrease in
the net investment in financing leases. The net investment in financing leases
was $741,000 at March 31, 2000, as compared to $2.2 million at March 31, 1999.
The investment in financing leases, as well as earned income from financing
leases, will decrease over the lease term as the Partnership amortizes income
over the lease term using the interest method of accounting.
Interest income from notes receivable decreased by $67,000 for the
three months ended March 31, 2000, compared to the same period in 1999. The
decrease in interest income from notes receivable is attributable to the decline
in net investment in notes receivable. At March 31, 2000, the net investment in
notes receivable was $2,136,000, compared to $3,510,000 at March 31, 1999.
9
<PAGE>
Total expenses decreased by $488,000 during the three months ended
March 31, 2000, as compared to the same period in 1999. The decrease in total
expenses for the three months ended March 31, 2000, compared to the same period
in the previous year, is a result of a change in the estimated allowance for
uncollectable notes receivable of $396,000 as well as a decrease in nearly all
of the items comprising total expenses, with depreciation expense contributing
the next largest decrease. These decreases are the result of the continued
decrease in the size of the equipment portfolio. Depreciation expense decreased
$74,000 during 2000, compared to 1999. This decrease is due to a decline in the
amount of depreciable equipment owned by the Partnership, as well as, an
increasing portion of the equipment owned by the Partnership becoming fully
depreciated.
Liquidity and Capital Resources
The Partnership's primary source of liquidity is derived from its
contractual obligations with a diversified group of lessees for fixed lease
terms at fixed rental amounts, and from payments of principal and interest on
its outstanding notes receivable. As the initial lease terms expire, the
Partnership will re-lease or sell the equipment. The future liquidity of the
Partnership will depend upon the General Partner's success in collecting the
contractual amounts owed, as well as re-leasing and selling the Partnership's
equipment as it comes off lease.
The Partnership reported net cash generated by equipment leasing and
financing activities of $770,000 and $1,748,000 during the three months ended
March 31, 2000 and 1999, respectively. The net decrease in cash generated is due
to a decrease in payments on financing leases and notes receivable.
The Partnership received cash distributions from joint ventures of
$69,000 during the three months ended March 31, 2000, as compared to cash
distributions of $67,000 during the same period in 1999. The slight increase in
distributions from joint ventures is attributable to an increase in the amount
of cash available for distribution from one equipment joint venture.
Proceeds from the sale of equipment increased as result of an increase
in sales activity of the Partnership's equipment portfolio. The Partnership sold
equipment with an aggregate original cost of $4.5 million for the three months
ended March 31, 2000, compared to $3.1 million for the same period in 1999.
As of March 31, 2000, the Partnership owned equipment held for lease
with an original purchase price of $695,000 and a net book value of $13,000,
compared to $8 million and $55,000, respectively, at March 31, 1999. The General
Partner is actively engaged, on behalf of the Partnership, in remarketing and
selling the Partnership's equipment as it becomes available. Until new lessees
or buyers of equipment can be found, the equipment will continue to generate
depreciation expense without any corresponding rental income. The effect of this
will be a reduction of the Partnership earnings during this remarketing period.
The total cash distributed to partners for the three months ended March
31, 2000 was $0, as compared to $1,632,000 for the same period in 1999. In
accordance with the partnership agreement, the limited partners are entitled to
95% of the cash available for distribution and the General Partner is entitled
to 5%. As a result, the limited partners received $0 and $1,550,000 in
distributions during the three months ended March 31, 2000 and 1999,
respectively. The cumulative distributions to the Limited Partners are
$122,934,000 and $118,852,000 as of March 31, 2000 and 1999, respectively. The
General Partner received $0 and $82,000 for its share of the cash available for
10
<PAGE>
distribution during the three months ended March 31, 2000 and 1999,
respectively. The Partnership is not planning to make distributions in 2000,
compared to the 1999 distribution rate of 5%.
As provided for by the partnership agreement, the General Partner has
determined to exercise its discretion that no further redemptions in the
Partnership will be permitted after March 31, 1998.
The cash to be generated from leasing and financing operations is
anticipated to be sufficient to meet the Partnership's continuing operational
expenses.
Impact of the Year 2000 Issue
The General Partner has appointed ResourcePhoenix.com. (RPC), an
affiliate of the General Partner, to manage its Year 2000 project.
RPC has a Year 2000 project plan in place and a "Y2K Project Team" has
been appointed. The team has identified risks, and has implemented remediation
procedures for its Year 2000 issues. RPC has budgeted for the necessary changes,
built contingency plans, and has progressed along the scheduled timeline.
Installation of all remediation changes to critical software and hardware was
completed on November 5, 1999. As of April 30, 2000, RPC has not encountered any
material year 2000 problems with the hardware and software systems used in our
operations. In addition, none of RPC's critical vendors have reported any
material year 2000 problems nor have they experienced any decline in service
levels from such vendors.
RPC will continue to monitor internal and external issues related to
year 2000.
Costs incurred by the Partnership will be expensed as incurred and are
not currently anticipated to be material to the Partnership's financial position
or results of operations.
The Partnership's customers consist of lessees and borrowers. The
Partnership does not have exposure to any individual customer that would
materially impact the Partnership should the customer experience a significant
Year 2000 problem.
11
<PAGE>
PHOENIX LEASING CASH DISTRIBUTION FUND IV,
A CALIFORNIA LIMITED PARTNERSHIP
March 31, 2000
Part II. Other Information.
-----------------
Item 1. Legal Proceedings.
-----------------
On October 28, 1997, a Class Action Complaint (the "Complaint") was
filed against Phoenix Leasing Inc., Phoenix Leasing Associates, II and III L.P.,
Phoenix Securities Inc. and Phoenix American Inc. (the "Companies") in
California Superior Court for the County of Sacramento by eleven individuals on
behalf of investors in Phoenix Leasing Cash Distribution Funds I through V (the
"Partnerships"). The Companies were served with the Complaint on December 9,
1997. The Complaint sought declaratory and other relief including accounting,
receivership, imposition of constructive trust and judicial dissolution and
winding up of the Partnerships, and damages based on fraud, breach of fiduciary
duty and breach of contract by the Companies as general partners of the
Partnerships.
Plaintiffs severed one cause of action from the Complaint, a claim
related to the marketing and sale of CDF V, and transferred it to Marin County
Superior Court (the "Berger Action"). Plaintiffs then dismissed the remaining
claims in Sacramento Superior Court and re-filed them in a separate lawsuit
making similar allegations (the "Ash Action").
In the Ash action, Plaintiffs have filed a fourth amended complaint
which includes six causes of action: breach of fiduciary duty, constructive
fraud, judicial dissolution of Cash Distribution Fund IV, judicial dissolution
of Cash Distribution Fund V, accounting and alter ego. The court sustained
Defendant's demurrers to the first four claims and Defendants have recently
answered the complaint concerning the remaining claims.
The Berger complaint relates to alleged misrepresentations made in
connection with the offering of Cash Distribution Fund V. Defendants have
answered the complaint and discovery has commenced. A class has been certified.
The Plaintiff's deposition has been taken and no other depositions are
scheduled.
The Companies intend to vigorously defend both actions.
Item 2. Changes in Securities. Inapplicable
---------------------
Item 3. Defaults Upon Senior Securities. Inapplicable
-------------------------------
Item 4. Submission of Matters to a Vote of Securities Holders. Inapplicable
-----------------------------------------------------
Item 5. Other Information. Inapplicable
-----------------
Item 6. Exhibits and Reports on 8-K:
---------------------------
a) Exhibits:
(27) Financial Data Schedule
b) Reports on 8-K: None
12
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
PHOENIX LEASING CASH DISTRIBUTION FUND IV,
A CALIFORNIA LIMITED PARTNERSHIP
------------------------------------------
(Registrant)
Date Title Signature
---- ----- ---------
May 12, 2000 Executive Vice President, /S/ GARY W. MARTINEZ
- -------------- Chief Operating Officer --------------------
and a Director of (Gary W. Martinez)
Phoenix Leasing Incorporated
General Partner
May 12, 2000 Vice President, Finance, /S/ ANDREW N. GREGSON
- -------------- Treasurer and a Director of ---------------------
Phoenix Leasing Incorporated (Andrew N. Gregson)
General Partner
13
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<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> MAR-31-2000
<CASH> 8,764
<SECURITIES> 391
<RECEIVABLES> 2,400
<ALLOWANCES> 182
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 696
<DEPRECIATION> 683
<TOTAL-ASSETS> 12,221
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 11,476
<TOTAL-LIABILITY-AND-EQUITY> 12,221
<SALES> 0
<TOTAL-REVENUES> 645
<CGS> 0
<TOTAL-COSTS> (79)
<OTHER-EXPENSES> 0
<LOSS-PROVISION> (375)
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 724
<INCOME-TAX> 0
<INCOME-CONTINUING> 724
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 724
<EPS-BASIC> .12
<EPS-DILUTED> 0
</TABLE>
